What happens to Social Security if the U.S. breaches the debt ceiling?
Time is running out to avoid the "X date," the fiscal limit when the U.S. will run out of money to pay its bills unless Congress raises or suspends the nation's debt ceiling. That may sound arcane, but it has very real implications for the 66 million people — retirees, disabled Americans and children — who receive Social Security benefits.
If the U.S. defaults on its obligations, Social Security recipients could see their checks delayed, according to experts. That could pose a financial hardship for many beneficiaries, especially the millions who rely on Social Security as their main source of income.
Still, the political uncertainty around the fight over the debt ceiling makes it hard to predict what would happen with Social Security, partly because of conflicting laws. And because the U.S. has never defaulted on its debt — a possibility that Treasury Secretary Janet Yellen said would lead to an "an economic and financial catastrophe" — there are no precedents that offer a guide to how the situation could play out.
If the U.S. defaults, "it is unlikely that the federal government would be able to issue payments to millions of Americans, including our military families and seniors who rely on Social Security," Yellen said late last month.
Here's what to know about Social Security and the bitter partisan fight over the nation's debt limit.
What is the debt ceiling?
The debt ceiling, also called the debt limit, is set by Congress and represents the maximum amount the federal government is allowed to borrow to pay its debts.
If the amount of government debt reaches that threshold and lawmakers fail to lift the borrowing limit, the U.S. would be unable to pay what it owes and could default.
How close is the U.S. to hitting the debt ceiling?
Estimates vary, but the U.S. is likely just weeks away from breaching the debt ceiling.
The "X date" could arrive as soon as early June to early August, the Bipartisan Policy Center recently projected. And Yellen warned congressional leaders in a letter last week that the U.S. could be unable to pay its bills as soon as June 1.
How could Social Security be affected?
Payments to Social Security recipients, as well as payments from the federal government to veterans, food-stamp recipients, and reimbursements to state governments for Medicare or Medicaid, could be delayed, credit ratings agency Moody's said in a recent report.
To complicate matters, there are conflicting laws about Social Security payments, notes Mary Johnson, the Social Security and Medicare policy analyst at the advocacy group Senior Citizens League.
Under the Social Security Act, beneficiaries are entitled to their full scheduled benefits. But another law, the Antideficiency Act, bans government spending in excess of its available funds. Johnson said there's no law that specifies what actions the Social Security Administration should take to ensure benefits are paid in full and on time.
"The reality is that the Secretary of the Treasury, who is responsible for the payments, has recently stated that 'it is unlikely' that the federal government could continue to pay Social Security benefits," said Nancy Altman, the president of Social Security Works, an advocacy group. "That has to be the authoritative voice on the issue."
If the U.S. defaults, what happens to Social Security?
It's possible your check could be delayed, although the length of the interruption would depend on how long it takes lawmakers to fix the fiscal situation.
Seniors and other recipients should monitor the negotiations over the debt limit, Johnson said. Recipients "need to be very careful about anything that is paid automatically based on their Social Security payment, because that may not get there in full or on time if the debt limit isn't raised on time," she added.
About 4 in 10 Social Security recipients rely on the program for 90% of their income. They'll most likely need to turn to family members or other support if payment is delayed.
Altman noted, "The prospect of Social Security benefits not being paid is an outcome that should concern everyone."
Can the U.S. avoid a historically unprecedented debt default?
Yes, if Congress raises, temporarily extends or revises the definition of the debt limit. However, for now President Joe Biden and congressional leaders remain locked in a standoff over the debt limit.
Lawmakers have succeeded in raising or extending the debt ceiling many times, suggesting that a compromise remains likely given the potential economic — and political — fallout of tipping the U.S. into default. Congress has made such actions 78 times since 1960, with 49 debt limit changes under Republican presidents and 29 adjustments under Democratic administrations, according to the Treasury.
